1 Advances in Political Economy - Department of Political Science

EDITOR’S PROOF

Sub-central Governments and Debt Crisis in Spain over the Period 2000–2011 139

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B&W IN PRINT

Fig. 2 Unemployment in Spain (percentage of active population and number of people unem-

ployed). Source: Figures in the public domain from the Spanish National Institute of Statistics that

are fully consistent with those provided by the OECD

lead to the several amendments of the already mentioned European Stability and

Growth Pact (ESGP) that have taken place. They have finally been used also for

justifying interventions or bailouts (Greece, Ireland, Portugal, and the bailout plan

for the saving banks in Spain).

In all these countries, the extremely critical economic situation created since

2008, together with the particularities of the specific economic problems affecting

each country, has resulted in spectacular increases in outstanding public debt levels

in just four years. In the case of Spain, the total public debt has doubled in terms

of the Spanish GDP if 2011 and 2007 years are compared, as Table2 shows (from

36.1 per cent of GDP to 72.1 per cent). Sub-central governments’ debt has also ex-

perienced a significant increase with about 68 thousand millions euros added to the

stock of Spanish public debt in just four years, with regional governments as main

contributors. However it has been at the central level of government where the dras-

tic turning point in economic cycles that took place in 2008 has caused the greatest

impact. Outstanding central public debt soared from 27.7 per cent of Spanish GDP

in 2007 to 52.1 per cent in 2001, adding more than 267 thousand millions Euros

(about 334 billions US dollars) to the total outstanding public debt in Spain over the

said four years.

Graphically, this evolution of debt by levels of government over the 2007–2010

period is shown in Fig.3, which includes also previous years for comparative pur-

poses.

There must be no surprise that Moody’s, Fitch and S&P, though they are very

much contested agencies as they gave AAA to Leman Brothers in 2006,^25 recur-

rently downgrade the ratings for central and sub-central government debt in Spain,

(^25) As well as to, for example, the four banks rescued in Ireland, which amounted the annual public
deficit in the country to more than 30 per cent of GDP. Remember that the European Stability and